Question 10.3: Part 1. A company pays $1,000 for equipment expected to last...

Fundamental Accounting Principles

Part 1. A company pays $1,000 for equipment expected to last four years and have a $200 salvage value.
Prepare journal entries to record the following costs related to the equipment.
a. During the second year of the equipment’s life, $400 cash is paid for a new component expected to materially increase the equipment’s productivity.
b. During the third year, $250 cash is paid for normal repairs necessary to keep the equipment in good working order.
c. During the fourth year, $500 is paid for repairs expected to increase the useful life of the equipment from four to five years.

Part 2. A company owns a machine that cost $500 and has accumulated depreciation of $400. Prepare the entry to record the disposal of the machine on January 2 in each separate situation.
a. The company disposed of the machine, receiving nothing in return.
b. The company sold the machine for $80 cash.
c. The company sold the machine for $100 cash.
d. The company sold the machine for $110 cash.

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